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Warns About Hitting Debt Ceiling

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    Moody’s Chief Economist John Lonski on Fitch's warning about the U.S. rating and the debt ceiling.

  • Duration 3:59
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Is another credit downgrade coming Fitch warning today they will downgrade the US triple -- rating if the debt ceiling is not raised.

With more on possible economic fall out John Lonsky Moody's chief economist.

Right John if they do this what happens what happens to the economy what happens to the stock market.

Well you know I would think that financial markets have had enough warning.

Of a possible downgrade of the US's triple -- credit rating by any agency other then that's in peace.

And thus perhaps it would not have that -- -- and impact provided that.

The downgrade was not especially -- -- that being said I'm pretty sure that there will be a negative psychological.

Shocked that will temporarily.

-- share prices sharply lower but provided that.

Policy makers in Washington can reassure markets that a washing he's gonna do war to stabilize the budget.

We could have -- recovery by equities quickly enough.

Maybe that's -- So sort of baked into the -- already it sounds like that's your point but you know that's -- -- said they didn't just say they -- down it down greatest that we -- make that debt ceiling crisis go away they also said -- the current negative outlook on the AAA -- is likely to be resolved with a downgrade later this year even if another debt ceiling crisis is averted.

They want to see spending cut.

Now do you think that the markets would go to town.

If there was some big deal on spending.

I think if substantial progress was made at -- expenditures over time.

So that this threat of a downgrade could be taken away so that the US -- triple -- credit rating could be.

Reaffirmed.

That -- markets would respond very positively and I think that businesses.

Would like this type of development you may see have a pick -- the capital spending and hiring activity.

Absolutely yeah Ben Bernanke Federal Reserve Chairman out this week saying that the Republicans have to go along with the president on this do you agree.

-- -- ceiling crisis if if we just.

Don't pay attention to what the president saying are -- big consequences.

Well there would be if the cut debt ceiling was not lifted quickly enough it's conceivable that perhaps the government shuts down for a week.

But by that time that becomes apparent.

That did this -- out of the government is causing.

On one -- does stress with the US economy that is threatening.

Too -- start another recession and I we think that by that time both parties would be forced to compromise on the issue.

And let's not forget you know historically I don't know of a single recession.

That has been blamed or lead to congress.

All previous recessions.

Have been blamed on the administration blamed on the president.

-- well let's hope and that's actually very -- are right.

Let's talk about debt that for a second it is 161000000000016.

Point four trillion right now how long can we don't unlike this.

Well we can't go on forever you know right now.

Medicare is scheduled to go bankrupt and 4043 Social Security goes under -- 2033.

Barring remedial action so -- did to be perfectly honest -- current debt structure.

Of the United States of America is unsustainable.

Long term and -- could tolerate.

Go right ahead finish up their John we could tolerate the current situation for now.

But alt -- but least something has to be done and the more quickly corrective action is taken.

The less painful will the remedy being.

In managing men are right John thanks for coming on tonight good stuff but not other natives but good thank -- -- --

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